CARGO IN CAHOOTS?

Much of the air cargo industry is potentially facing severe fines from international competition authorities. Investigators on three continents are trying to determine whether a group of cargo airlines engaged in anti-competitive behavior such as illegal fixing of rates and surcharges.

Last week, officials raided offices of many airlines in Frankfurt, Chicago, San Francisco, New York, Seoul and other cities. In some cases, computers were confiscated as evidence. Investigators requested information from several more carriers without searching facilities. While the investigation's primary focus is in Europe, authorities in Asia and the U.S. cooperated, too, with the European Commission and the U.S. Department of Justice understood to be the driving forces.

"The commission has reason to believe that the companies concerned may have violated" antitrust laws, the EC says in a statement. A spokesperson for the Justice Dept. confirms that "the antitrust division is investigating the possibility of anti-competitive practices in the air cargo industry."

As of late last week, at least 16 airlines had either been raided or contacted with requests for information: Japan Airlines, Nippon Cargo Airlines, Cathay Pacific, Singapore Airlines, Korean Air, Asiana, Lufthansa Cargo, British Airways, Virgin Atlantic, Air France-KLM Cargo, Cargolux, SAS Cargo, American Airlines, United Airlines, Polar Air Cargo and LAN Cargo. United's office in Frankfurt was searched, while American received a subpoena only. Being contacted by investigators does not mean that an airline is charged with collusion or price-fixing activities.

The investigation appears not to follow the contours of cargo alliances such as WOW or SkyTeam Cargo, as a number of independent cargo airlines are also subject to the inquiries. But integrators like FedEx, UPS and DHL are not accused of anti-competitive behavior.

The airlines pledged to be fully cooperative in the upcoming process, although most declined to discuss the allegations. The investigation is expected to take several months at least.

Authorities kept silent about exactly what they believe could make an anti-trust case against the various airlines. SAS Group revealed part of what it has been accused of: "According to the European Commission, cooperation has involved routes within Europe as well as to countries outside the European Union. The alleged competition limiting cooperation has supposedly been carried out since 2000 and mainly involved agreements regarding surcharges to offset external cost increases, such as fuel surcharges, costs for additional security measures (after the attack in the U.S. in September 2001) and surcharges for war-risk insurance premiums (applied in conjunction with the outbreak of war in Iraq in 2003)."

Other industry sources say that the investigation also includes alleged illegal cooperation on air cargo rates. The EC would not comment on whether it is looking at fuel surcharges that have contributed significantly to European airlines' financial improvement.

Cargo operators already can exchange data on a limited basis, using the International Air Transport Assn.'s tariff conference system, in which 95 cargo airlines participate.